Before the Bell June 10

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Tickers:  SPY QQQ IWM FB AAPL TSLA MSFT AMZN GOOGL NFLX SMH XLE

Before the Bell  is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.

Inspiration

As “influencers” ( media / social media ) compete for your  mindshare, they have figured out that balanced, moderate thinking loses that battle. What wins is the person / media outlet with the biggest megaphone and most sensational topics / headlines. Social media algorithms purposely feed you conflict because it stimulates your brain.   Understand that this “brain crack” is detrimental to you. Take great care in guarding your mental well-being by watching how much of this stuff you consume. Like a virus in your computer, over time it nibbles away and corrupts the core program.  And as my old counselor used to tell me…. “It’s a lot harder to de-program flawed thinking than it is to help people prevent that thinking in the first place”

  

 Earnings

 

Today’s Companion Video  

The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed.  Run the video at  1.5x to maximize efficiency without loss of clarity.

Find the Companion Video HERE

Macro Data Releases Week of  June 6

  • Monday – Nothing
  • Tuesday – International Trade; 3yr Bond Auction
  • Wednesday – Mortgage Applications, Oil inventory; 10 yr bond auction
  • Thursday – Jobless Claims, NatGas inventory; 30 yr bond auction
  • Friday –  CPI, Consumer Sentiment; Rig Count; Treasury Statement

Critical Event Risks Next Week

  • June 10 CPI
  • June 15 Big VIX OPEX Wed morning
  • June 15 FOMC 2pm Wednesday Afternoon
  • June OPEX Friday June 17

CPI Terror

The bears made inroads yesterday by breaking key support from the consolidation ranges established over the past 8-10 days.  Focus your time and energy on the key levels presented below on the static charts and inside the video. Today is a big day. If today resolves lower, the bears gain momentum. If bulls hold the line, they live for another day.

Macro Framework Spring / Summer 2022

Find the Blog Post HERE

Earnings Season & Bracket Trades

As earnings season kicks into gear, a reminder that this is prime time for Bracket Trades. Bracket Trades are those trades created when a stock gaps up or down from a news driven event. Bracket Trades are set up as “2nd day trades” where you alarm the high and low of the prior day’s trading range, then patiently wait for price to either break lower or higher from the range.  You then follow price out of the range. I will do my best to help identify them for you, but you can easily find them yourself by doing a sort for “GAP ups” and “GAP Down” on your trading platform.  I add additional filters for only stocks above $10 and at least 500,000 shares traded. You can add additional filters to cut down the sort further. Generally speaking, stocks favor continuing in the direction of the gap higher or lower.

You can find out more about Bracket Trades in the video Run the Player at 1.5x      HERE.

Battle Royal Brewing: ESG vs Carbon Energy

Imagine you’re a portfolio manager scrambling for alpha and you’re way behind your benchmarks.  As you survey the sector landscape, energy and commodities stand out as a precious few that are working. But you’ve been told to hate carbon and avoid it. That’s the battle.  Will managers opt to go down with the ESG ship or swallow their pride and try to save their year?  I have no idea but it will be a fascinating story to watch play out.

The graph is an 8 week sector rotation study of the SPDR Sectors.  The graph shows where momentum and relative strength lie. Over time, a stock or sector will rotate in a clockwise direction as it weakens, then re-strengthens over time. The chart does not show you absolute performance. For that we go to the table below to notice that energy was the only sector with positive returns. If this continues to be the case over the summer, will money managers direct flows to the sector?  We’ll watch and keep a finger on the pulse.

Re-Post  – Thoughts on Energy

With energy / materials / commodities / marine shipping working I wanted to share a few thoughts on how I am approaching these sectors. Going to keep the wording brief and just bullet point the main ideas.

Bearish Factors

  • Every village idiot and market commentator is talking about energy
  • Bull sentiment is off the chart ( bearish )
  • Prices are extended / over bought in many names
  • Demand destruction……have not seen it yet but at some point people will curtail consumption

Bullish Factors

  • The War on carbon shows no signs of abating. You’d think with gas pushing $5 the politicians would get the message but nothing yet.
    • Probably a higher chance of energy assistance stimmies hitting mailboxes before the November elections than a rolling out of the red carpet to oil drillers
      • California has already announced energy stimmies
    • Energy stimmies already being done in the UK and other EU countries and Germany just announced corporate energy assistance to mission critical industries.
  • Russian sanctions appear to be getting tighter, not looser
  • Oil and NatGas inventories at near historic lows.
  • SPR releases have done nothing
  • Commodities across all sectors remain incredibly tight.
  • Europe is frantically trying to stock inventories of oil and NatGas heading into the winter. Price is apparently no object
  • Price Action
    • Prices can go higher than anyone can imagine
    • Over the past days, oil has been attacking $120. A break above opens up 125 and beyond.
    • NatGas back over $9.  Mid-teens are possible
      • With EU NatGas at $30 every NatGas tanker available will be booked and filled. That price arb may not be completely closed but it should narrow.
  • No Supply
    • We’ve gone over this. Whatever supply response is out there it is minimal.
    • OPEC doesnt have the spare capacity. They are raising prices.
  • Institutional Demand
    • What if I told you that oil producers, refiners etc are CHEAPER on a valuation basis now than they were 6 months ago….shocker
    • As a money manager with a long term horizon, justification can easily be made to buy today
    • A great way to lose your job is to badly miss benchmarks. With energy / materials working and little else I can see money managers piling in just to keep their head above water.

How to play

  • There WILL be a correction. Accept that a giant red bar is in our future. It may be tomorrow or in 3months. We dont know
  • Trying to time a short is a fool’s errand and a great way to get run over.
  • I want to stay long energy, commodities, and materials
    • Diversify across the sectors. Not all E&P or refiners
    • Keep position sizes reasonable
    • Keep heading to the bank early and often ( roll & Protect)
      • When your name goes appreciably in the money, peel off the profits and go to the bank. Roll to a higher strike and stay long.
      • Remember, they’ll be a day when those positions get cut in half over night or in the premarket when all you can do is watch. There will be comfort in knowing that the lion’s share of your gains are in a safe place.

INDEX CHARTS

Use the following pivots and levels in your active and swing trading.

SPY Daily

SPY 1 hr

QQQ Daily

QQQ 1hr

IWM Daily

IWM 1 hr

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